Errors & Omissions Insurance Won’t Protect Your Financial Career

Financial Advisors and Financial Service Professionals are mandated to carry Errors & Omissions Insurance, but unfortunately this will not protect your career or credibility should something go wrong. A highly capable and qualified financial advisor I know was recently investigated due to the fraudulent actions of one of her clients. Even though it was later discovered that she was in no way connected to her client’s crime, the process for proving her innocense cost her the career she spent years building. Her licenses were suspended for nearly four months while an investigation was conducted by the SEC, NASD and her broker/dealer. During this investigation, she was not permitted to contact her clients. Yet, those conducting the investigation did contact every single one of her clients, asking some very detailed information. Immediately, more than 75% of her clients jumped ship. Her Errors & Omissions Insurance could not protect her, but there is a solution.

I recently met a financial advisor and sales manager for a Fortune 100 company who described an amazing service — Pre-Paid Legal Services, Inc. (USA) and Pre-Paid Legal Care of Canada Corporation (Canada), something I had heard of before but was rather skeptical of. He mentioned how he recommends that every single advisor and agent in his company MUST carry PPL’s services as a means to properly protect their business and career. During a recent investigation in his office, this sales manager had an agent who was notified that a complaint had been filed. Fortunately, the agent did keep very good records and files. But, because he also had a PPL membership he was able to have one of the best law firms in the state at his disposal to review and advise him of his legal rights. It was quickly discovered that the agent had followed proper procedures but that his client had declined a disability insurance policy only later to have filed a complaint that no such offer was given after the client injured himself on the job. PPL’s law firm quickly stepped in and wrote a letter to all parties concerned. It was estimated that the low-cost legal insurance monthly fee of $26 this advisor paid saved him $1,000 in retainer fees plus $600 for the letter drafted and mailed to all parties, as well as possibly saving him his career and credibility from further investigation and suspension.

I told this story to a Vice President from a leading Canadian national financial advising and insurance provider. The entire company is considering this service for all their advisors. It seems to be a service worth checking out.